December 21, 2010
Your Get-out-of-Debt Checklist
Â A new year is upon us. Pretty soon,Â you’ll be waving good-bye to 2010 and making a brand new start. However, if you’re like most consumers, debt is probablyÂ putting a damper on the celebration. Belt tightening, penny pinching, budget cutting, dollar stretching and every other euphemism for saving money has become part of your vocabulary by now. If you’re struggling with a mountain of debt, here’s a checklist for regaining control.
- Keep tabs on your credit utilization. A credit utilization ratio is a calculation used by creditors that measures how much credit you’re using compared to how much you have available. The more unused credit you have, the better your score.
- Stay in contact with your lenders. If you find yourself in a tight spot, and you don’t think you’ll be able to pay your bills on time, contact your lenders immediately. You might be able to work out a payment plan.
- Devise–and stick to–a budget. Knowing exactly how much money you have available will help you manage your finances.
- Cut the fat. Once you’ve devised a budget, identify areas where you’re overspending. Cut back or eliminate those items.
- Focus on high-interest debt. Focus on paying off all high-interest debt. Once you’ve paid off that debt, apply the money you would have used to pay that debt toward your next-highest debt, and so forth. This way, you’ll get rid of high maintenance fees faster.
- Use cash whenever possible. Paying for items in cash will make you think twice about creating new debt.
- Add income. If your belt can’t get any tighter, and spending less isn’t helping much, find a way to make more money. Now is the time to look for a part-time or freelance job.
- Seek help from a certified financial planner. A CFP can help you identify areas where you need to improve and assist you with reaching your goals.
Sheiresa Ngo is the multimedia content producer for consumer affairs at Black Enterprise.
- See more debt management tips:
- Watch: 5 money management tips with Mellody Hobson
- Smart money movesÂ for every stage of your life
- 5 podcasts to boost your financial brainpower